The Malta Independent 11 August 2022, Thursday

AUM racks up €11.2 million in losses in two years

Kevin Schembri Orland & Albert Galea Sunday, 13 December 2020, 09:30 Last update: about 3 years ago

The American University of Malta has racked up a total of €11.27 million in losses in the space of two years, accounting records seen by The Malta Independent on Sunday show.

Records show that Sadeen Education Investment Limited, the company which owns and operates the American University of Malta (AUM), registered €5.37 million in losses in 2019 and another €5.89 million in losses in 2018.

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The much-vaunted AUM was announced by Joseph Muscat’s government in May 2015, with the intention of rejuvenating the dock area in Cospicua.  It was officially established in September 2016 and welcomed its first batch of students in September 2017. The agreement saw the Dock 1 campus transferred to AUM, where the university has carried out extensive rehabilitation works and where it currently operates. A sizeable plot of land at Zonqor point was also part of the controversial agreement, however former Prime Minister Joseph Muscat said that the project there will only start when the Cospicua campus is full.

The AUM project has been a controversial one from the start, mainly due to the proposed Zonqor point land take up.

As of October 2019, only 143 students were enrolled at the University, and AUM has failed to answer questions from this newsroom on how many students it hosts currently.

Regardless of the numbers and the financial situation, the university still wants to undertake works on the Knights building in Cospicua. Many residents, and even a government MP, objected to the proposed development, and it was in fact refused by the Planning Authority.  The appeal process is still on-going, although a hearing on the project was postponed indefinitely last week.

Now, account records show that the educational institution, which is owned by a company which falls under the Jordanian Sadeen Group, is not faring well financially either.

With only €458,023 generated in revenue from tuition fees in 2018 and 2019, the company which runs AUM has had to rely on the benevolence of its shareholders to continue to function.

The auditors, RSM Malta, said that the financial statements “indicate that during the year ended 31 December 2019, the company has suffered a loss of €5.37 million and its total liabilities have exceeded its total assets by €20.64 million. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.”

When looking up the non-current liabilities of the company, it emerges that Sadeen Education Investment Ltd has €34.64 million which it borrowed since its inception still to pay.

€25.79 million of these are due to the company’s shareholder, while the remaining €8.8 million are due to “related parties”.  All these amounts due are interest free, unsecured, and repayable on demand.

The full amount which is owed was lent to the company throughout previous years, with the bulk of it being in the last three years: the shareholders lent €17.53 million in 2017, €8.05 million in 2018, and another €2.70 million in 2019.

This being said, the company’s accounting report for both 2018 and 2019 reads that the company’s ultimate shareholder “has written to the directors outlining his comment and ability to continue to fund all losses and commitments of the company as and when the need arises.”

The company’s accounts read that it was on this basis that the directors of the company considered it appropriate to prepare the financial statements of the company on a going concern basis.

This is reflected in answers which the AUM provided to this newsroom in response to questions on the educational institution’s financial sustainability.

In a set of questions, this newsroom queried about the financial losses and asking when the Provost predicts it will make a profit, whether it is receiving any financial aid from the government, and why it is still proposing the Knights building project given the losses.

“AUM is totally committed to Malta as a long term project.  Despite any losses, also due to the current situation, we will continue to invest in our campus”, AUM Provost Professor Narcisa Roxana Mosteanu told The Malta Independent on Sunday.

“Our shareholder has the financial capability to satisfy all investment needs and we hope that with the cooperation of everyone, we will manage to get the project to its full potential”, the Provost added.

She noted that apart from putting forward an application for Covid-19 wage supplement, AUM is not getting any subsidies from the government.

The “related parties” which have also lent money to the company were identified in the report as companies over which the directors exercise significant influence.  “Transactions are carried out with related parties on a regular basis and in the ordinary course of the business”, reads the report.

The amounts due to these related parties are disclosed in the financial statements; however the exact identity of these related parties is not listed.

The latest financial statement pertains to the year ending in 2019, meaning that the Covid-19 pandemic is not a consideration in these financial results.  However, it is noted within the financial statements, which were filed at the beginning of September, that the company is closely monitoring the situation vis-à-vis the pandemic and “will take any steps necessary to mitigate any potential impact there might be.”

“In view of the uncertainty surrounding this situation, the management believes that it is too early to quantify the effect that this pandemic might have on the overall operations of the company”, the statement reads.

 

AUM remains silent on current number of students

While AUM has, thus far, not responded to requests by this newsroom to reveal its current student numbers, the contract granting the university the land on which it operates through an emphyteusis has specifically mentioned the number of students it expects the university to cater for.

Former Prime Minister Joseph Muscat had said, in March 2019, that if the American University of Malta (AUM) does not reach the stipulated target of 4,000 students up to four years after all construction and embellishment phases have to be completed in 2025, then all its facilities and land will return to the government.

The Malta Independent on Sunday sent a number of questions to the Provost of the university, including, asking about Covid-19’s impact on the institution, for student numbers, whether the Provost believes AUM will still need the Zonqor campus eventually and to see how sure the Provost is that AUM will meet the required number of students by the target date.

“As with all other institutions and organizations, Covid-19 has affected AUM operationally and in attracting new students.  The programmes are being conducted both in lecture rooms, with the necessary safety requirements, and remotely,” the Provost said.

“AUM is positive that, if the terms of its agreements are fully implemented, it will have the needed resources and chances to fulfill its obligations and achieve the targets as set therein.”

The Provost said that while there are setbacks related to diminishing access to visa application facilities, mostly due to the Covid-19 situation, “we are positive that with the necessary assistance from the authorities, as required in the mentioned agreement, all targets can be attained.”

The Provost said that the AUM's current focus is on the Cottonera campus, “while we remain committed to what is outlined in the agreement. The initial focus was the rehabilitation of the British Building on our campus, which has upgraded the whole area. The next priority is to reach an agreement to rehabilitate to the same high level of finishing the Knights Building, which will further regenerate a long abandoned site with private investment by AUM.”

No student numbers were provided in the answer and neither were they provided in response to a subsequent set of questions on the university’s financial situation.

 

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